ACFE Legal Elements of Fraud 2 — Questions and Answers
Question 1: Under common law, which element of fraud requires that the victim actually relied on the false representation?
- Scienter
- Justifiable reliance (Correct answer)
- Materiality
- Proximate causation
Correct answer: Justifiable reliance
Justifiable reliance means the victim must have reasonably relied on the misrepresentation when making their decision.
Question 2: The term 'scienter' in fraud law refers to:
- The amount of damages suffered
- Knowledge of falsity or reckless disregard for the truth (Correct answer)
- The identity of the victim
- Physical evidence of the scheme
Correct answer: Knowledge of falsity or reckless disregard for the truth
Scienter is the mental state element requiring the perpetrator to have known the statement was false or acted with reckless disregard for its truth.
Question 3: A material misrepresentation in fraud is best defined as one that:
- Involves a large sum of money
- Would influence a reasonable person's decision (Correct answer)
- Is made in writing
- Occurs more than once
Correct answer: Would influence a reasonable person's decision
Materiality means the false statement was significant enough that a reasonable person would consider it important when making a decision.
Question 4: Which of the following is NOT a required element of civil fraud under most U.S. jurisdictions?
- False representation of a material fact
- Intent to deceive
- Resulting damages
- A written contract (Correct answer)
Correct answer: A written contract
Civil fraud does not require a written contract; it can occur through oral or implied misrepresentations.
Question 5: In the context of fraud, 'concealment' as a form of misrepresentation requires:
- Active destruction of documents
- A duty to disclose that was breached (Correct answer)
- Verbal denial of wrongdoing
- Use of encrypted communications
Correct answer: A duty to disclose that was breached
Concealment constitutes fraud when a party with a legal duty to disclose material information intentionally withholds it.
Question 6: Which doctrine holds that a corporation can be held liable for fraud committed by its employees acting within the scope of their employment?
- Respondeat superior (Correct answer)
- Alter ego
- Piercing the corporate veil
- Successor liability
Correct answer: Respondeat superior
Respondeat superior ('let the master answer') makes employers vicariously liable for torts, including fraud, committed by employees in the course of their duties.
Question 7: The statute of limitations for fraud typically begins to run from the date:
- The fraud was committed
- The fraudster was identified
- The victim discovered or should have discovered the fraud (Correct answer)
- Law enforcement was notified
Correct answer: The victim discovered or should have discovered the fraud
Most jurisdictions apply the 'discovery rule,' starting the limitations period when the victim discovered or reasonably should have discovered the fraud.
ACFE Legal Elements of Fraud 2
Under common law, which element of fraud requires that the victim actually relied on the false representation?